The most notorious hospital bankruptcy in the nation's history left Pennsylvania healthcare in shambles and had repercussions throughout the not-for-profit hospital industry nationwide. When the dust had settled, creditors were holding the bag for $1.4 billion in debt.
From Pittsburgh, where the Allegheny Health, Education and Research Foundation was based, to Philadelphia where it greedily expanded, the 1998 demise of the 14-hospital system crumbled the bond market, leaving cash-strapped hospitals frantically searching for white knights in the form of capital-rich, investor-owned chains.
It was the first case in which the Securities and Exchange Commission charged not-for-profit healthcare executives with misleading bond buyers. Key executives were arrested on charges of raiding endowment funds and sued for misrepresenting financial information. Although most charges have been settled, former Chief Executive Officer Sherif Abdelhak is awaiting trial on charges that he illegally raided more than 350 charitable endowments to support the system.